question archive Fortune Company purchased Diary cattle at an auction for P300,000 on July 1, 2024
Fortune Company purchased Diary cattle at an auction for P300,000 on July 1, 2024
Subject:AccountingPrice:2.86 Bought12
Fortune Company purchased Diary cattle at an auction for P300,000 on July 1, 2024. Cost of transporting the cattle back to the company's farm was P3,000 and the company would have to incur similar transportation cost if it was to sell the cattle in the auction, in addition to an auctioneer's fee of 2% of sales price.
On December 31, 2024, after taking into account the location, the fair value of the biological assets had increased to P500,000 (that is the market price including the cost of transporting the asset).
What amount of net gain or loss should be recorded?
a. 190,000
b. 194, 000
c. 196, 000
d. 200, 000
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A. 190,000
Step-by-step explanation
Initial Recognition of Biological Asset is measure at fair value less cost to sell, same with the subsequent recognition. When the fair value less cost to sell of a biological asset is increase it will result to gain presented in profit or loss. This is the reason why we just compute the fair value less cost to sell of biological asset during July 1 and Dec. 31
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